Siam Commercial Bank (SCB) has scrapped a 17.8-billion-baht deal to buy a controlling stake in Bitkub Online, saying the country’s biggest digital asset exchange needs time to fix regulatory issues.
“Bitkub is currently in the process of resolving various issues as per the recommendations and orders of the Securities and Exchange Commission, which are uncertain in terms of time frame in resolving those issues,” SCB X Plc, the holding company for the bank, said in a statement issued to the Stock Exchange of Thailand on Thursday.
“As a result, the buyer and the seller have agreed to terminate the transaction.”
SCB said it had been conducting due diligence on the company and did not find any “significant abnormal issues which are irremediable”.
The announcement came after the Securities and Exchange Commission (SEC) last month ordered Bitkub to review the listing process of its KUB coin on its exchange.
Also last month, the SEC slapped a 24-million-baht fine on the company and two officials for violating trading rules by fabricating information regarding the trading volume of digital assets in 2019.
Bitkub Online said in a statement on Thursday that the two companies had conducted thorough due diligence and “did not find any indication of significant irregularities that cannot be rectified” but agreed there were "unresolved issues" with the SEC.
“Bitkub Online’s business operations are not affected in any way and the company remains the country’s leading digital asset and cryptocurrency exchange platform with resources for executing its plans and strategies,” it said.
News of the SCB decision was greeted favourably by the bank’s investors. SCB shares jumped 6 baht (5.7%) on the SET to close at 110.50 baht in heavy turnover worth 6.5 billion baht.
The SCB transaction, first announced in November last year, was to have been carried out by the bank’s brokerage affiliate, SCB Securities Co Ltd. It was hailed at the time as a bold move by the oldest Thai-owned commercial bank into the world of cryptocurrency and alternative financial products.
The move followed the SCB group’s announcement of a major restructuring, in order to move beyond the traditional banking business.
It said at the time that it was “committed to strategic plans to expand into businesses relating to blockchain technology and digital assets”.
Jirayut Srupsrisopa, the founder and chief executive of Bitkub Capital Group, said when the deal was first announced that his company was no longer just a startup, but was now becoming a necessary part of the infrastructure critical for Thailand’s new financial industry.
However, questions began to arise about the deal in March this year, when the Bank of Thailand announced a new rule to cap investment by commercial banks in digital asset businesses at under 3% of their capital in order to reduce risk. The SCB-Bitkub deal would exceed that threshold, as it represented roughly 5% of the bank's capital.
Analysts said the new criteria could put Bitkub at a disadvantage because it may drive SCB to either negotiate for a lower price or postpone the deal.
Meanwhile, the outlook for cryptocurrency and digital assets has dimmed worldwide this year with a number of high-profile meltdowns involving asset exchanges and so-called stablecoins.
The number of Thai cryptocurrency trading accounts has fallen by 67% since January, the SEC said recently.
It said the sharp decline in active trading accounts, from 707,000 to 230,000 as of July 25, stemmed from poor market sentiment resulting from macroeconomic conditions, including interest rate increases and a general economic slowdown.
SEC statistics showed monthly crypto trading value has continued to decline in line with the drop in the number of accounts, from 180 billion baht in January to around 54 billion on July 25. More than 50% of investors are individuals.